Evan Parness' commentary was included in a Bloomberg Law article covering the Delaware Supreme Court ruling concerning forfeiture-for-competition provisions in a limited partnership agreement. Evan discusses how the Federal Trade Commission’s (FTC) proposed ban on non-compete clauses in employment contracts would have provided federal guidelines for courts and companies on this issue and how states differ on the matter.
Evan shares his insight that corporate clients must weigh whether the most employer-friendly option for employment agreements is found in the state where they’re headquartered, the state where their employees are located, or the state where they’re incorporated. For example, Evan states that Delaware and New York “really distinguish between a non-compete that in essence precludes an employee from being able to work in their particular field for a period of time versus an agreement that allows them to compete, but at a cost.” In the latter scenario, a company may be asked to offset a potential employee’s financial losses incurred by leaving a competitor. But “they’re not running the risk of getting potentially tied up in a tortious interference case” for knowingly hiring a candidate breaking a non-compete, Evan noted.
“This is why courts are willing to give a little bit more leeway to an employer trying to enforce a forfeiture-for-competition agreement versus a straight-up non-compete,” he said.
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